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Interview: John Waddell keeping Archangels top of investment tree

John Waddell. Picture: Julie Bull

John Waddell. Picture: Julie Bull

  • by TERRY MURDEN
 

IT ALL began 20 years ago when Mike Rutterford and Barry Sealey were introduced to Douglas Anderson, a budding businessman with an idea for an eye-scanning device, writes Terry Murden.

Rutterford and Sealey had made enough money from various business projects that they wanted to put something back, and decided to support ­Anderson’s fledgling company, Dunfermline-based Optos. It was to be the start of a rewarding relationship. The two investors formalised their partnership into Archangel Informal Investments and two decades on it is now Scotland’s biggest business angel syndicate.

In 2005, lawyer John Waddell, who had been working as a director of the Edinburgh merchant bank Noble Grossart, joined as chief executive. Supported by a small staff at an office in Rutland Square, he sifts through about 150 applications for funding every year from hopeful entrepreneurs. It is a painstaking operation and only a handful will pass the rigorous selection process.

“We will support three, maybe four a year,” he says. But that still equates to almost 80 projects over the group’s lifetime, into which a syndicate of investors has put up £74 million – about £1m per project – typically acquiring 30 per cent of the equity in return. A further £100m has been raised from other funders, such as venture capitalists. The biggest single recipient has been Touch Bionics, the artificial limb developer, which has benefited from £8m from Archangels. The most rewarding has been life sciences company TSL, which generated a six-fold return.

Fourteen of the companies supported have exited, including three flotations, while 25 continue to be supported. The current portfolio includes a mix of high-tech (35 per cent), life sciences (27 per cent), IT (15 per cent) and other sectors (23 per cent).

It may surprise some people that half the projects the group has backed have failed, leaving investors out of pocket. One was a chain of hot dog vendors. Waddell raises his eyebrows, as if not quite believing their decision.

“But they represent just £9m out of the total,” he says with a cheeky grin that adequately explains that the syndicate members have made a more than healthy overall return over the years.

“There is always a risk of a project not working, or someone else doing it, or no-one wanting to buy the product.”

It is the potential outcome of any investment, despite the intense due diligence and Waddell’s tendency to brief and analyse projects with the board members before he puts a formal proposal to them. They will typically invest £100,000 between them and he will then sound out the 120-member syndicate, though he leaves them to make the decision without making a recommendation.

Archangels is not regulated, nor does it have a fund of its own. All the money raised goes straight to the companies wanting finance.

Waddell says: “The investment policy is the same for each one. Invest in Scotland, in products with international reach and that have intellectual property. We get two to three business plans a week, and now and again we see something that is interesting. We are well plugged in to the universities, particularly Strathclyde.”

Investors can remain invested for up to a decade, though it is the “exit” that provides the reward for them and a company’s directors. Trade buyers were hard to find during the “exit drought” between 2005 and 2009, but the climate has improved and there have been five sales in the last two years.

However, the process is not limited to investing and selling. Companies are nurtured and helped to grow. Archangels will put up to two nominees on the board – Waddell himself is a director of CXR Biosciences.

Now 56, he studied law at Edinburgh University and at 27 became the youngest partner at Steedman Ramage in Edinburgh before embarking on a career in business that included three years in strategic planning at Bank of Scotland. Previously, he had a productive spell in legal services at logistics firm Christian Salvesen, during which he ran the flotation of its temporary power business Aggreko, whose separation from the company had been a highly-charged affair among shareholders.

One of the Salvesen family, Alastair, who is chairman of Dawnfresh Seafoods and the Dovecot Studios in Edinburgh, is one of Archangels’ directors alongside Rutterford and Geoff Ball, best known for his long spell as chief executive of housebuilder Cala. Gavin Gemmell, former senior partner at Baillie Gifford, and Eric Young, a chartered surveyor, make up the other members.

Barry Sealey, now 76, also continues to be active in the group.

“He is still doing every deal and still does presentations. He must phone me four times a day,” says Waddell, who believes the proliferation of enthusiastic angel investors reflects positively on Scotland’s ability to continue producing good ideas and companies despite its reputation for low performance in entrepreneurial endeavour.

“There are enough companies for us to be getting on with and the quality of what we see is very cheering,” says Waddell. “In fact, I’d say it is getting better.”

He counts 19 angel groups in Scotland and credits the universities for improving the way that spin-out companies present their case for investment.

“The quality of business plans we see are better because the universities are getting better at commercialisation and people realise there is help to be had.”

But that is not to say there are no setbacks or errors. He says: “From our point of view, I would say the mistake we have made is not taking enough time on a proposal or getting to know the people involved well enough.”

He says presenters who are “on transmit, but do not listen”, fail to interact or be transparent are likely to struggle. They also often have to be told their idea is great, that the business will fly, but they are the wrong people to lead it. They have to be encouraged to stay on, but let someone else run the company.

“Those who readily accept that are the ones who raise their game,” he says.

CV

Born: Inverness

Education: Edinburgh University

Ambition while at school: I wanted to go to art college, but in the end studied law

The car you drive: Subaru

Kindle or book? Book

Favourite music: Rolling Stones, Van Morrison, John Martin

Can’t live without: Pencil and paper

Favourite place: Home

Interests outside work: My two grown-up children, and I like to cook.

 

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